Businesses that are registered as a corporation in Delaware must file a Delaware Annual Report every year, and most must also pay a Franchise Tax fee yearly. These requirements apply whether a Delaware corporation operates in the state of Delaware or somewhere else.
With the March 1 deadline for Delaware annual reports and tax payments approaching, time is running out!
Corporations must get moving now to stay compliant with the Delaware Secretary of State Department’s requirements. Although Delaware Limited Liability Companies don’t have to file an annual report, they do have an annual Franchise Tax filing to complete each year by June 1.
In this post, I’ll cover information to help you understand the requirements that Delaware corporations and LLCs must pay attention to. For legal and tax guidance on how these compliance responsibilities affect you, talk with your accountant and attorney.
Who Has to File and When is the Deadline?
According to the Delaware Divisions of Corporations website (delaware.gov), “All corporations incorporated in the State of Delaware are required to file an Annual Report and pay a franchise tax. Exempt domestic corporations do not pay the Franchise Tax, but they must file an Annual Report.”
- Non-exempt and exempt domestic corporations must file their Annual Reports and pay their Franchise Tax fees by March 1 of each year.
- Foreign Corporations, corporations that are conducting business in Delaware but are incorporated in another state, must file an Annual Report by June 30 of every year.
- Delaware Corporations that are reinstating their status to good standing with the state or that are ending their existence (dissolution) must file an Annual Report and pay any state taxes that are due.
What is in a Delaware Annual Report?
Some of the information a corporation must provide in a Delaware Annual Report include:
- The corporation’s physical address
- The names and addresses of corporate officers
- The names and addresses of all directors on the corporation’s Board of Directors
- Authorization by a corporate officer (necessary for filing the report)
How Much Does it Cost to File?
Exempt domestic corporations (non-profit, civic, and charitable organizations) pay $25 to file their annual reports. Non-Exempt domestic corporations pay $50 to file their annual reports.
The Annual Report filing fee is $125.00 for Foreign Corporations in Delaware.
What is the Delaware Annual Franchise Tax?
The Delaware Secretary of State office levies a Franchise Tax on non-exempt domestic corporations for the privilege of being incorporated in Delaware. Exempt domestic corporations do not have to pay the annual tax. Delaware Limited Liability Companies (and Limited Partnerships and General Partnerships) do not have to file an Annual Report, but they do have to pay an annual Franchise Tax.
The amount a corporation must pay depends on whether the for-profit corporation issues stock and the method of calculating the tax.
For-profit, Non-stock Corporations
For-profit corporations that do not issue stock must pay a Franchise Tax of $175.00 per year.
For-profit Stock Corporations
For-profit corporations that issue stock use either the Authorized Shares Method or the Assumed Par Value Capital Method to calculate the Franchise Tax amount they owe. The Authorized Shares Method is the default method and the simpler of the two. The Assumed Par Value Capital Method is more complex and generally is more favorable for corporations with high-value assets.
Minimum and Maximum Franchise Tax with the Authorized Shares Method
- Minimum – $175
- Maximum – $200,000
Minimum and Maximum Franchise Tax with the Assumed Par Value Capital Method
- Minimum – $400
- Maximum – $200,000
Note that corporations flagged as “Large Corporate Filers” will have a maximum Franchise Tax fee of $250,000.
Corporations that expect to owe $5,000 or more must pay estimated taxes in quarterly installments:
- 40 percent (due by June 1)
- 20 percent (due by September 1)
- 20 percent (due by December 1)
- The remainder (due by March 1)
Delaware Limited Liability Companies
LLCs must pay an annual tax of $300 tax each year. The tax is due by June 1.
Businesses Ending Their Existence or Renewing Status
Any Delaware Corporation that is ending its existence or reinstating their status to good standing is required by law to file an Annual Report and pay all tax due. Likewise, an LLC must pay all tax due under those circumstances, as well.
Delaware S Corporations Requirements
Companies that have elected to be taxed as an S Corporation must comply with the requirements that the underlying business entity must fulfill.
In other words,
- A C Corporation that has elected S Corp status must submit an Annual Report and pay Franchise Tax by March 1 of each year.
- An LLC that has elected S Corp status must pay Franchise tax by June 1of each year
Penalties for Filing Late
The penalty for not filing a completed domestic corporation Annual Report on or before March 1 is $200. Also, any unpaid tax balance gets hit with interest at a rate of 1.5 percent per month.
Foreign Corporations must pay a penalty of $125 if they don’t file their Annual Report.
Also, consider that the State of Delaware will deny a Good Standing Certificate to any corporation that doesn’t meet the annual filing requirements. And if a corporation fails to file its Annual Report or pay its Franchise Tax fees for two years, the state may revoke its Certificate of Incorporation—thus losing all of the liability protection and tax advantages that come with being a Delaware Corporation.
LLCs that fail to pay or submit a late Franchise Tax payment owe a penalty fee of $200. An interest rate of 1.5 percent per month accrues on the tax and the penalty until the LLC pays what it owes.
How Do You File a Delaware Annual Report and Pay the Annual Franchise Tax?
Delaware has mandated electronic filing of Annual Reports and Franchise Tax payments. Businesses must use the seven-digit Business Entity File Number assigned to them from the state when paying online. Note that the online application is available from 8 a.m. to 11:45 p.m. EST daily, according to the Delaware Divisions of Corporations website.
Delaware corporations’ registered agents get state notifications in December of the next year’s Annual Report and Franchise Taxes responsibilities. CorpNet is an authorized Registered Agent in Delaware (as well as in every other state in the U.S.), so if you use our registered agent services, we will make sure you stay on top of these important filings. And, even if you don’t use us as your registered agent, our filing experts can prepare and file your Delaware Annual Report and Franchise Tax on your behalf.
Where to Find More Information
For more details about the Delaware Annual Report and Franchise Tax requirements, visit the Annual Report and Tax Information and Franchise Taxes page of the Delaware Division of Corporations website. On the website, you’ll also find the definition of an “Exempt” corporation and an explanation of the methods for calculating Franchise Taxes. You can also see the criteria for being considered a Large Corporate Filer.
Also, consider consulting your tax advisor and attorney with any questions about your company’s Annual Report and Franchise Tax responsibilities.
The Deadline is Almost Here!
With the March 1 deadline for corporations looming, there’s no time to waste. Don’t delay! Contact CorpNet to prepare your Delaware Annual Report and Franchise Tax filings. Our team has helped many Delaware Corporations get these critical filings completed accurately and on-time. We’re here to help you, too!
If your business is an LLC (or a Limited Partnership or General Partnership), contact us about handing your Franchise Tax filing. By planning, you’ll enjoy peace of mind when the June 1 deadline arrives.